56% of Brits would struggle to access credit

While three in five (60%) British consumers are confident that they would be accepted for credit, actually qualifying for a loan could be more of a challenge. Indeed, new research from Mintel reveals that more than half (56%) of all adults could face difficulty, or may be offered a higher rate than expected, when trying to access credit.

As many as one third (34%) of Brits demonstrate behaviour that suggests money management issues, such as making a late payment on a bill in the last 12 months*. A further 34% have at least one employment or circumstantial factor that could cause issues when applying for credit, for example, being in temporary employment or moving address multiple times in the last few years. Meanwhile, 13% of consumers say that they have experienced financial difficulties.

But it is not only consumers with specific financial or employment issues who have less access to credit. Those with low household incomes may also struggle to access credit offered by mainstream lenders. Almost one quarter (23%) of Brits have a household income of less than £15,500, giving some indication as to the number of people who may find it hard to access credit due to low income.

Jessica Galletley, Financial Services Analyst at Mintel, said:

“There is a significant disparity between consumers’ credit confidence and the reality of actually qualifying for a loan. This confidence means that most people are doing very little to improve their access to credit. Education around the impact of making minimum credit card payments and encouraging consumers to repay slightly more could improve their credit profile, particularly among a typically lower-income bracket.”

Overall, Mintel research indicates that the majority (53%) of people never check their credit score, with a further 15% saying they only check their credit score once every few years. Meanwhile, 37% of all credit users are currently trying to improve their credit score, with those aged 25-34 (52%) the most likely to be trying to improve their credit score.

“Most credit consumers tend to feel indifferent about checking their credit score, however, there are many good reasons for people to know and monitor their score. Perhaps the most important, and most relevant, is when it comes to applying for a mortgage. Having a good credit score is essential for those looking to gain the best rates with mainstream lenders. Finding ways to prompt consumers to check their score, besides applying for a mortgage, will be key to engaging them for the long term, and helping them to keep track of their financial situation.” Jessica adds.

Today, the majority (66%) of adults in the UK owe money on a loan or credit product. This is most likely to be on a credit card (39%) or mortgage product (29%). Around half (47%) of 25-34-year-olds owe money on a credit card, compared to only 20% of 18-24-year-olds.

Of all credit users, 31% owe less than £1,000 across their loan and credit products (excluding money owed on a mortgage or student loan). Only 6% of consumers owe more than £25,000, with 12% owing between £10,000 and £24,999.

Most credit users (82%) prefer to repay their debts as quickly as possible due, in part, to the fact that many consumers tend to feel uncomfortable owing money on credit products (66%). Some 31% of 18-34-year-olds are considering taking out a loan in the next 12 months** compared to 21% of 35-44-year-olds.

* to October 2016
** to October 2017

Press review copies of the Consumers and Credit Risk UK 2017 report and interviews with Jessica Galletley, Financial Services Analyst, are available on request from the press office.